A new era at the AG's office

Northwestern Financial Review, Mar 1, 2001 by Bengtson, Tom

The brouhaha over the John Ashcroft confirmation got me to thinking about Janet Reno, the attorney general in the Clinton administration. I don't know a lot about Ashcroft, but he certainly can't be any more hostile to community bankers than Reno was.

Remember the Blackpipe State Bank in Martin, S.D? The Reno-led Justice Department basically shut the bank down when it filed a discrimination lawsuit against the $18 million bank in 1993. The Justice Department said the bank refused to lend to Native Americans. But the fact was that almost no banks were lending to people living on sovereign land because of the difficulty in securing collateral. The FDIC had examined Blackpipe State Bank in 1990 and gave it a glowing CRA rating.

What was so outrageous about the Justice Department's case against Blackpipe was the restitution it wanted. In addition to compensating those who had been denied loans by the bank, the Justice Department wanted the bank to compensate area Native Americans who had never approached the bank. The Justice Department's theory was that some people may have been intimidated by the bank's alleged reputation for not lending to Native Americans. The bank's president at the time, Bruce Hodson, told me in an interview that the bank had no such reputation, and that in fact the bank enjoyed a healthy relationship with the neighboring tribes.

Nonetheless, the Justice Department pursued the case, largely to make an example of the bank for the rest of the industry. This battle between the U.S. Justice Department and a little community bank was like aiming a cannon at a mosquito. Blackpipe State Bank never had a chance and Hodson's only option was to sell the bank, which he did in May 1994.

Compare the Justice Department's activism in this case with its inaction following the 1998 announcement that Citicorp and Travelers Group would merge. The Justice Department sat on the sidelines, allowing this mammoth merger that would have a far greater impact, on far more people, than anything any $18 million bank could do.

Perhaps as a gesture of goodwill, Reno spoke to bankers at the 1994 convention of the Independent Community Bankers of America. But ultimately her actions during her tenure rendered her words of outreach moot. In the end, the Clinton administration's Justice Department sided with the biggest players in the banking industry, while exhibiting almost no understanding for the challenges faced by community bankers.

No matter what you think of John Ashcroft, his tenure as US. attorney general can only be an improvement for community bankers.